Smart Cities- Meeting the Managerial and Policy Challenge of Urbanization in India
Devyani Bhushan

Fulfilling the commitment made in the election manifesto of the Bharatiya Janata Party (BJP) to build- “100 new cities; enabled with the latest in technology and infrastructure - adhering to concepts like sustainability…”, Prime Minister Narendra Modi, on the 25th of June 2015 launched three government flagship schemes aimed at changing the face of urban India -Smart Cities Mission, Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and Housing for All Mission—with an expected expenditure of around Rs.4 trillion over the next few years.

As is well known by now, the Smart City Mission will cover 100 cities, to be selected through a “Smart City Challenge”, to be developed in a period of five years. The objective of the Mission is to provide basic infrastructure to give a decent quality of life to its citizens, a clean and sustainable environment and application of Smart Solutions, keeping citizens at the centre.

The Smart City Mission will be operated as a Centrally Sponsored Scheme, with a financial support of Rs. 48,000 crores over five years i.e. on an average Rs. 100 crore per city per year. An equal amount, on a matching basis, will have to be contributed by the State/Urban Local Bodies (ULBs).The Government has allocated Rs 7,060 crores (approximately $1.2 billion) in the current financial year for the Mission. States/UTs may also access the National Investment and Infrastructure Fund (NIIF). Other sources of finance visualized for the Mission are- ULBs own resources from collection of user fees, beneficiary charges etc. Finance mechanisms such as municipal bonds with credit rating of ULBs, Pooled Finance Mechanism, borrowings from financial institutions, including bilateral and multilateral institutions as well as both domestic and external private sector. The Smart City Action Plan will be implemented by Special Purpose Vehicles (SPV) to be created for each city and state governments will ensure steady stream of resources for SPVs.

In the budget speech of 2014-15 of the Union Finance Minister and the subsequent Mission documents issued by the Urban Development Ministry, a two stage selection process for identifying those cities which have the most potential to be upgraded as Smart Cities, was outlined. In the first stage, State/ UT Governments have shortlisted potential cities on the basis of conditions precedent and a scoring criteria as well as consultations with the urban local bodies and other stakeholders. At the end of the first stage, the Union Urban Development Ministry has announced a list of 98 cities selected under Smart City Mission, which have a population of about 13 crore accounting for over 35 per cent of the country’s urban population.
The Urban Development Minister, Venkiah Naidu, while announcing this list of the cities said that, all the selected cities will have to prepare Smart City Plans. These will be evaluated in the second stage of competition based on a broad set of criteria to pick up the top scoring 20 cities for financing during the financial year 2015-16. Funds may be released to these 20 cities by the end of this year, he said. Others will be asked to improve upon the identified deficiencies before participating in the next two rounds of competition. Those cities to be selected in the second stage of competition would be provided with central assistance of Rs.200 crore in the first year followed by Rs.100 crore each year during the next three years, the Minister informed. 

Cynics and political naysayers have tried to ridicule the idea of Smart Cities. We should, however, not forget that at 31 per cent of our total population, the urban population in India contributes over 60 per cent of the nations GDP. It is projected that urban India will contribute nearly 75% of the national GDP in the next 15 years. In India 300 million Indians currently live in towns and cities. Within the next 20-25 years, another 300 million people will get added to Indian towns and cities, according to an approach paper for the 12th Plan of the Planning Commission.While it took almost 40 years for India’s urban population to rise by 230 million, it could take only 20 years to add the next 250 million. Such speed of urbanization requires urgent managerial and policy prescriptions. The Smart City initiative along with AMRUT and Housing Mission, signal this Government’s progressive and forward looking approach to challenges of urbanization in India.

“Smart” is not just a fashionable prefix. The Second Administrative Reform Commission in 2005 and 2009, in its reports referred to Smart governance, the acronym Smart standing for- simple, moral, accountable, responsive and transparent government. The main driver for smart governance being use of information technology. There is no denying the fact that for facing the managerial and policy challenges of India’s urbanization, all these parameters encompassed in the acronym Smart, are of critical importance.

As urbanization increases, demand for key services such as water, transportation, treatment and recycling of solid and liquid waste, housing, health and education will increase. This in turn will put substantial stress on urban local bodies and related resources. If India does not pay, without losing further time, adequate attention to strengthening its urban infrastructure it will lead to a considerable decline in the quality of living of our citizens. Urban Development Minister Venkiyah Naidu has underlined that “A smart city would ensure core infrastructure needed for decent living in urban areas. We are not aiming at making our urban landscape look fanciful and flashy. The prime objective is to enhance the quality of urban life by addressing deficiencies in core infrastructure. Expectations in various quarters may be high but the Mission is very practical and realistic in its intentions and objectives.” Thus it is clear that the NDA Government looks at Smart Cities as inclusive and sustainable cities which will not only create ample employment opportunities but would also improve the standard of living, eventually contributing to the improvement of the national economy.

The Congress party has tried to portray the Smart City Mission as a mere extension of Jawaharlal Nehru National Urban Renewal Mission, ( JnNURM), implemented during the UPA regime. This fits in with the Congress argument of characterizing all new initiatives of the present NDA Government as repackaging of old UPA Government’s schemes. Nothing could be further from the truth. JnNURM was launched in 2005 for a seven-year period (extended by two more years), for improving urban infrastructure and basic services. It was excessively centralized with the Union Government appraising and approving all projects submitted by the States, with no scope for flexibility. The Smart Cities initiative on the other hand is flexible and enables States and urban local bodies to better manage their limited resources and to deal in an innovative and comprehensive manner with the requirements of a rapidly increasing urban population in the selected cities.

Some sections, have also tried to fuel a debate between “Just Cities” and “Smart Cities”. While Just Cities have been presented as pro-poor, affordable and inclusive, Smart Cities have been characterized as elitist, pro-private investors and favoring economically productive consumers and producers. This at best, is a flawed debate. The Smart Cities, worldwide (Smart Cities, Smart Nation Program in Singapore, European Innovation Partnership on Smart Cities and Communities in The European Union and Masdar City in Abu Dhabi, in UAE), have emphasized the use of information technology and communications (ITC) and innovation to constantly improve living standards and efficiency in the daily lives of the urban population, while ensuring a level of sustainability in economic, environmental and social needs of the present and the future generations. Hence the concept of Smart City by definition includes inclusiveness and sustainability. The mission document as well as the Prime Minister’s address while launching the mission rightly emphasizes the use of technology, environment friendly development, energy saving, walk to work , citizen participation and “bottoms up” planning in Smart Cities. There is a renewed emphasis on decentralized decision making in the entire process. It is visualized that the decisions would be made at the city level, while the State and Central Governments would play only a supportive role. The foremost reflection of this is in the competitive nature of the selection of the 100 Smart Cities.

But what is a “Smart City”, without transformed urban governance led by democratically elected urban local bodies? Doubts have been raised in certain quarters that the Implementation Agency for the Smart City intervention i.e. a Special Purpose Vehicle (SPV) has the potential of bypassing and overriding the authority of the democratically elected urban local bodies. The doubters however ignore the fact that the State Governments and the urban local bodies are the co-financiers and joint moral guardians of the Smart City SPV. The SPV board would have nominees of the Central Government, the State Government and the urban local body.SPV will be registered as a private limited company, under Companies Act 2013, at the city level. In such a company, the State/UT and the ULB will be the promoters having 50:50 equity share holding. Private Sector or Financial Institutions could also be considered for taking equity stake in the SPV, provided States/UT and the ULB together have majority shareholding and control of the SPV. Hence it is clear that such a system would only encourage autonomy of city governance as well as decentralized city level decision making.

The allocation of the numbers of Smart Cities to States has also raised some questions. It has been asked why “disproportionate” allocation has been done in favor of Uttar Pradesh (13 Smart Cities), where only 22.2 per cent of population resides in urban agglomerations and Bihar (3 Smart Cities) where only 11 per cent of population is urban. While allocating the targets, the Government it seems, has gone by the principle of equity. UP and Bihar as well as a few other States are characterized by a historical deficit in development of urban infrastructure and basic services. Therefore it is imperative to address these historical deficits.

For the Smart City Mission, to succeed, it must not be forgotten that the Mission is not only about innovative use of technology, particularly IT technology and private participation. Rather the Mission has everything to do with integration, coordination, innovation and synergy in the functioning of different stakeholders of the Smart City ecosystem. Smart infrastructure (roads, pedestrian pathways, water, sewer, drainage networks, solid and liquid waste management, pollution control systems etc), smart mobility(seamless travel from home to work, to education , to recreation, adequate mobility options for physically challenged and senior citizens etc), smart resource management (management of water, energy and waste while ensuring environmental quality etc),smart statutory and governance systems (reforming urban laws and governance, transparent and participative local governance systems etc) and smart financing (optimum mobilization and utilization of public and private finances), have to converge together for Smart Cities to function and become examples which could be replicated across the country. Smart Cities are indeed the need of the hour for India. They would hopefully provide an efficient and sustainable solution for servicing India’s urban growth.

Published Date: 7th December 2015, Image Source:
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Vivekananda International Foundation)

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